Iran War Raises Economic Risks for Bangladesh, Pakistan: S&P Report

New Delhi — The ongoing tensions in West Asia could pose serious economic challenges for South Asian countries like Bangladesh, Pakistan, and Sri Lanka, mainly due to their heavy reliance on imported energy, according to a report by S&P Global Ratings.

The report highlights that these economies are particularly exposed to rising oil prices and possible supply disruptions. A prolonged crisis involving Iran could strain their financial stability and even impact their sovereign credit ratings.

While Bangladesh, Pakistan, and Sri Lanka have shown early signs of recovery in recent months, the report cautions that sustained high energy costs and disruptions to trade and remittance flows could derail this fragile progress.

Among the countries assessed, Bangladesh faces notable vulnerabilities. Its economy depends almost entirely on imported crude and refined oil, with reserves sufficient for less than a month. In case of prolonged supply constraints, stricter consumption controls may be required.

Additionally, nearly half of Bangladesh’s electricity generation relies on gas, with about 25% of that demand met through imports—another potential pressure point if the conflict continues.

The report notes that although Bangladesh’s credit profile can likely absorb short-term shocks, longer-term pressure from rising fuel prices could affect economic growth, inflation, and external balances. Inflation has already been climbing, reaching 9.2% in February, up from 8.6% in January.

Despite these challenges, Bangladesh’s foreign exchange reserves have improved significantly, rising to $29.6 billion as of mid-March 2026, compared to $19.7 billion a year earlier. However, the report warns that external stability could again come under stress if energy prices remain elevated.

Overall, the analysis underscores how geopolitical tensions in West Asia can ripple across energy-dependent economies, especially those still navigating recovery phases.
 

With inputs from IANS